Manufacturing is at the heart of the global economy. It accounts for about 30% of global gross domestic 1 , with the US and China both contributing more than US$2 trillion2 to the world economy each year from their manufacturing activities.
Today, however, manufacturers everywhere face an environment that is being reshaped by technological shifts, economic uncertainty, and fast-changing consumption patterns.
The world's top manufacturing nations have responded with strategies that seek to build on their traditional strengths and help them to remain competitive as conditions change. Germany, most famously, has Industry 4.0. China's equivalent is Made in China 2025. Korea has an initiative named Manufacturing Industry Innovation 3.0; the UK's policy vision is Industry 2050; and France has Industry of the Future. In the US, efforts to modernize manufacturing and distribution are being driven by the private sector, which has come together in the Industrial Internet Consortium.
All of these approaches share a common core: intelligent manufacturing.
With continuous change destabilizing the competitive environment, it is now harder for manufacturers to create value through traditional business models. Customers today have more options and less brand loyalty than ever. Demand is diversified and volatile. Markets are also more competitive and fast-paced, with just-in-time business models. Meanwhile, rising wages and other costs add further complexity.
Flexible manufacturing based on digital technologies is now becoming the norm. Intelligent, connected systems enable machines and humans to collaborate on "mass customization", where factories maintain the efficiencies of mass production while quickly creating personalized products for highly specific customer needs.
Manufacturers are also beginning to extend their after-sales service and increase customer engagement. With an ecosystem of equipment, devices, and sensors communicating in real time, manufacturers are empowered to create exceptional customer experiences and build long-term relationships with users.
While seeking to improve agility and responsiveness, these new business models also bring their own challenges.
Production costs continue to escalate, with raw materials, labor, and energy now more expensive worldwide. The need to meet stringent environmental regulations adds to the challenge. Instead of moving production to lower-cost locations, siting production hubs closer to markets and investing in intelligent manufacturing technologies are seen as more sustainable solutions. Unfortunately, many manufacturers, especially those with tight margins, do not have the capital budget to put this into practice.
Intelligent manufacturing is about much more than technology adoption. It touches on all aspects of the production process including human capital, quality control, environmental issues, and more. Intelligent manufacturers need to find the right balance: between using existing talent and new technology; between outright profit and impact on the environment; and between ensuring that workers are supported and giving them opportunities to upgrade their skills.
The transition to intelligent manufacturing requires that companies combine advanced operations and information technologies to enable collaborative design, virtual simulation and data-driven planning and analysis. This demands visibility and information sharing between all parties in the supply chain, from factory floor to distributor, dealer, or retail outlet, with synchronized processes and zero inventory. However, this is difficult to achieve, as data tends to exist in silos in traditional manufacturing systems. The machine-to-machine (M2M) and machine-to-human/human-to-machine (M2H/H2M) communications necessary for intelligent manufacturing are also beyond the capabilities of legacy IT infrastructure.
Predictive maintenance is a case in point. It boosts productivity by avoiding the need to shut down plant and equipment to fix failures or for unwarranted routine maintenance. But to accurately predict when maintenance is necessary, data about in-service equipment and actual operating conditions must be available and analyzed in real time. This data must also trigger field mechanics' work orders and spare parts inventory management and ensure that regulatory requirements are being met.
Commitment and vision from the C-suite is essential if companies are to make the most of the potential of intelligent manufacturing. Leaders may not understand what is possible, or they may doubt that intelligent manufacturing technology is applicable to their industry or at the scale of their operations. Some may see this as an IT issue, rather than a strategic concern.
What capabilities do manufacturers need to develop and meet their business objectives in an era of smart manufacturing?
2. Manufacturing Output by Country. http://greyhill.com/manufacturing-by-country